Despite 'Quantum Leap,' China's Innovation Sector In Distress

Wednesday, China’s Micius satellite, launched the day before, sent back its first data to the China Remote Sensing Satellite Ground Station in Miyun, in the northeast corner of the Beijing municipality. The 202 MB of data, Xinhua News Agency stated, was received “in good quality.”

As the Wall Street Journaltermed it, China’s leap wasn’t just great. It was “quantum.” Micius is the world’s first quantum-communications satellite. As such, it offers truly hack-proof communications.

State media has been all over this story, telling the world that China is no longer a follower when it comes to science. Yes, Micius, named after a fifth century B.C. Chinese scientist, represents a real advance, and Beijing deserves kudos for the launch and data transmission. Nonetheless, Micius reveals fundamental weaknesses of Beijing’s relentless drive to innovate.

Let’s start with the science. Quantum communications relies on the process of “entanglement,” what Einstein called “spooky action at a distance.” For reasons that nobody has been able to figure out, entangled photons move in tandem, no matter how far apart they may be. Inside Micius, a laser shining through a crystal creates entangled pairs of particles, and then the pairs are separated. If one set is downloaded to Beijing and another to a second location, messages can be sent by manipulating one set of the particles in one of the two locations.

Messages have been sent over hundreds of kilometers on the ground using entangled particles, but China is the first to try this from space. If the data received in Miyun was indeed readable, the Chinese have mastered difficult-to-solve technical problems caused by atmospheric interference of the photon streams between the earth and the satellite.

These are important advances, but this is not exactly blazing a trail. How did Beijing accomplish this? Establishing goals, building an organization, devoting gobs of money, but most of all, attracting talent from abroad. “We’ve taken all the good technology from labs around the world, absorbed it, and brought it back,” bragged Pan Jianwei, who is leading China’s quantum project, in an interview carried on Chinese state media on the day before the launch.

There has been a race to launch the first quantum satellite, but only one country was racing. U.S. researchers have done “groundbreaking work” in the area but without the required public backing. The U.S. spends only about $200 million a year on quantum research. China’s budget is not known outside Beijing circles but is thought to be multiples of that figure.

China’s really good at “big science.” Do you want to see the world’s fastest supercomputer? How about the planet’s largest radio telescope? Novel human gene-editing experiments? For these and other wonders, you need to book your ticket for the People’s Republic of China.

The concept of massive teams working out technical problems in a top-down organization is not peculiar to China, but it fits in nicely with the Communist Party’s collectivist notions.

This is not to say that China cannot develop great technology on a smaller scale. “There’s this strange belief that you can’t build a mobile app if you don’t know the truth about what happened in Tiananmen Square,” said Kaiser Kuo, a leading figure in the Chinese tech industry, to the Washington Post. “Trouble is, it’s not true.” And he’s right. Many in his country don’t know about the 1989 massacre in Beijing, but China, in fact, is ahead of the U.S. in commerce conducted through mobile devices.

Many agree. Harry Shum, Microsoft’s executive vice-president of technology and research, in April said China will “lead the world” in artificial intelligence. He likes what is happening in Shenzhen in terms of innovation.

Moreover, there’s exciting things in other Chinese cities. “I don’t see why in the future China wouldn’t have 15 to 20 Silicon Valleys,” said Jonathan Woetzel of McKinsey to the Financial Times. As Woetzel points out, Chinese cities—China’s 2010 Census shows 144 urban areas with at least a million people—want to become centers of innovation.

And there has been real progress. China this year for the first time ever has broken into the world’s top 25 innovative economies as ranked by the U.N.’s World Intellectual Property Organization. Nonetheless, there are 15 to 20 reasons why China will not, this decade or next, develop a string of Silicon Valleys.

Even if one ignored the exhaustion of the Chinese economy, it’s clear the tech sector is in trouble. Jobs are hard to come by, as the South China Morning Postreported at the beginning of this year, at leading companies like Alibaba and Tencent, where hiring should be robust.

Since then, there has been a worrying slowdown in growth of private investment, a bad sign for the tech sector. Private investment in the first seven months was up only 2.1%, a record-low increase. In July, the figure was in fact negative, down 1.2% year-on-year. In June, it fell for the first time since 2004, when Beijing began keeping this statistic.

Many factors are preventing private investment, especially the state gobbling up most of the available credit and cash. State investment was up 21.8% in the first seven months of the year. State-owned enterprises can innovate, but for the most part they do not. The troubling private investment figures, therefore, suggest hard times ahead for innovation outside big science projects.

As Kuo correctly tells us, kids can advance technology in a repressive society, but they cannot do it in one without capital. China, at the moment, is starving its most promising businesses of cash.

Pan Jianwei, the head of China’s quantum-communications effort, doesn’t have to worry about funding. He can get as much of it as he wants, at least in the meantime. Yet when the Chinese economy finally crumbles, even China’s big science projects may have to close their doors.